Taxation of labour income and the skilled-unskilled wage inequality
Journal Publication ResearchOnline@JCUAbstract
Using a simple general equilibrium model of a small open economy that produces (i) an industrial good, (ii) an agricultural good, and (iii) a sector specific intermediate good, under competitive conditions, this paper examines the impact of a tax on labour on skilled-unskilled wage inequality. It is shown that, when all goods are traded, a tax on labour in the industrial sector increases skilled-unskilled wage inequality. On the other hand, a tax on labour in the intermediate good sector has the opposite effect. However, when the intermediate good is non-traded, the impact of a tax on labour in either of the two sectors is negative. Furthermore, irrespective of whether or not the intermediate good is traded, a tax on labour in the agricultural sector increases skilled-skilled wage inequality.
Journal
Economic Modelling
Publication Name
Economic Modelling
Volume
47
ISBN/ISSN
1873-6122
Edition
N/A
Issue
N/A
Pages Count
5
Location
N/A
Publisher
Elsevier
Publisher Url
N/A
Publisher Location
N/A
Publish Date
N/A
Url
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Date
N/A
EISSN
N/A
DOI
10.1016/j.econmod.2014.12.037